New Jersey politicians playing a high stakes game over Atlantic City’s future

As Atlantic City runs out of money and prepares for a three-week partial shutdown of municipal operations, the rhetorical battle over the reasons for its fiscal plight and the best way to resolve it has focused in part on the extremely high cost of city government.

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Senate President Stephen Sweeney (D-Gloucester) and Gov. Chris Christie remain committed to a state takeover, but Assembly Speaker Vincent Prieto (D-Hudson) has vowed to block any legislation that could curtail the city’s collective bargaining agreements. Meanwhile, Mayor Don Guardian argues the city can bring its costs under control without the state taking the municipal helm.

Last week Sweeney distributed rankings that show that in 2013, Atlantic City had by far the highest per-resident spending in New Jersey, at $6,489 per person. The next highest, Linden in Union County, has about the same population but a much smaller budget, spending $2,421 per individual. Many other cities spent closer to half that amount.

Atlantic City’s budget in fiscal 2014 was $256 million, compared with $99 million for Linden. Camden, with nearly twice the population, had a budget of $182 million or $2,358 per person, while Newark spent $621 million or $2,236 per person.

In a radio interview last week, Christie argued for passage of a stalled Atlantic City takeover bill, citing the high costs. He said he needed the power to reduce the pay of municipal employees and dissolve expensive labor contracts to make the city solvent again.

“In Atlantic City, a town of 39,000 people, the police chief makes $212,000 a year. His deputy chief makes $193,000 a year and the deputy fire chief makes $183,000 a year,” Christie said. “I would remind you that that is both more than I make and the county executive makes. And with all due respect to the police chief in Atlantic City, I do not think his job is harder than the county executive in Essex or the governor of the state of New Jersey.”

Guardian, a fierce opponent of the takeover bill, has responded by saying the per-resident figures don’t take into account 40,000 additional people who work in the city, and 300,000 who visit every weekend. Recent city budgets have also included tens of millions in reserves for tax refunds and legal costs that a state-imposed emergency manager forced the city to set aside, he said.

“The governor and the state senator like to talk about how we are two are three times the cost of other municipal governments, but they don’t compare apples to apples,” Guardian said last week, at a press conference on the planned municipal shutdown.

Guardian said he has cut the city payroll and spending sharply, bringing this year’s proposed budget down to $211 million. The police and fire departments have been restructured under the guidance of experts sent in by the state, and their unions agreed to lower starting salaries, smaller step increases in their pay, and other reduced benefits, he said.

The city’s budget should continue to fall until it reaches $180 million in two years, the mayor said. That would bring per-resident spending down to about $4,550, which would still be the highest in the state by far. Guardian said it was hard to see how to cut the budget further; employee costs only amount to $81 million a year, and completely eliminating city government would still leave $100 million in annual costs, due to debt service and legacy costs for retirees and their spouses, he said.

The mayor also handed out his own set of figures, on state subsidies for cities and school districts. While a number of urban centers receive millions in aid annually, Atlantic City received none for decades because it had plentiful casino tax revenues. Last year, following the closing of four of the city’s 12 casinos, it received $10 million for the first time. Its schools have been given aid for the past two years, including $38 million last year, according to Guardian.

By comparison, Camden received $101 million and its schools $280 million, according to Guardian’s data. New Brunswick, to which Atlantic City is sometimes compared because of its large population of college students, received more than $130 million in combined city and school aid.

No compromise in sight

The back and forth over municipal spending comes as both sides in the fight dig in and blame the other for intransigence, leaving a path to solvency unclear.

With Christie refusing to provide any short-term financial help unless he is given control of city operations, Guardian said the municipal government will partially shut down for three weeks starting on April 8. Police, firefighters, and other essential employees will work for IOUs and other employees will either go on hiatus or voluntarily work without pay, Guardian said. Volunteers are being recruited to handle senior-citizen services and other functions.

The years-long struggle over how to handle the resort city’s huge debt overhang, broken property-tax structure, and extremely high operating costs had appeared near resolution earlier this year when Christie and Sweeney agreed on a bill that would allow state officials to dissolve labor contracts, dismiss employees, sell the city’s water utility and unused land, and renegotiate debt obligations.

Christie said if he was given control of Atlantic City, he would also finally sign a PILOT (payment in lieu of taxes) bill that would ensure a steady flow of funds from the city’s eight remaining casinos and end a series of casino tax appeals that have inflated the city’s debt and contributed to the state of near-bankruptcy. He has twice vetoed similar bills.

But due largely to Prieto’s refusal to hold an Assembly vote on a takeover bill, because of its threat to the collective bargaining rights of city workers, the plan to resolve the crisis remains in limbo. Guardian has also repeatedly criticized the bill, calling it “draconian.”

As news broke last week that the city was preparing a temporary shutdown plan, Christie ratcheted up the pressure on Prieto, demanding he allow a vote.

“If this is not passed and put on my desk in the exact form that it was passed in the Senate, both the PILOT bill and the takeover bill, then no action will be taken and Atlantic City will be out of money on April 8th,” Christie said in the radio interview. “And the public employees who will not be paid, the services that will not be provided, they can all come to the speaker’s office and ask him why he will not agree with everyone else who has looked at this situation, including his own majority leader, who has said that the votes exist to pass it.”

“Believe me, if I had the authority to do what I wanted to do in Atlantic City right now, I would do it. I do not,” he said.

Prieto rejected the governor’s argument, listing ways the state could help Atlantic City or compel it to make changes without new legislation. He noted that the state provided a $40 million emergency loan last year and could provide another; $9 million would prevent a shutdown, according to Guardian. Prieto said the state’s Local Finance Board could also adopt a plan to liquidate the city’s debt, appoint a fiscal control officer, and exert more control over the city budget.

The Local Finance Board could also ask the city to sign a very restrictive memorandum of understanding, detailing required changes in exchange for receiving financial help, Prieto said.

“Wide-ranging authority already exists to save Atlantic City,” Prieto said. “It’s time for the governor to stop blaming others in between his out-of-state trips and instead do his job. The only power he clearly lacks is to destroy existing collective-bargaining agreements — and everyone should know how I feel about protecting collective-bargaining rights.”

Given the impasse, the three-week shutdown is unavoidable at this point, Guardian said. After tax payments start arriving in early May, the city will have funds to pay employees again, but another shutdown is possible in late May or June. Passage of the PILOT bill or an increase in state aid, combined with the city’s ongoing cost-saving efforts, would allow municipal operations to proceed without interruption, he said.

In the long term, tax revenue from a variety of new housing and business developments around the city should bring it long-term fiscal stability in as soon as two years, Guardian said.

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